DBRS Morningstar Confirms Berkadia’s Commercial Mortgage Servicer Rankings

DBRS, Inc. (DBRS Morningstar) confirmed its MOR CS1 commercial mortgage primary servicer ranking, MOR CS2 commercial mortgage master servicer ranking, and MOR CS3 commercial mortgage special servicer ranking for Berkadia Commercial Mortgage, LLC (Berkadia or the Company). The trends for all three rankings remain Stable.

The primary servicer ranking recognizes Berkadia’s strong professional depth, robust training programs, well-established and integrated offshore operations, extensive internal audit regimen, thorough portfolio management, and efficient loan administration. The Company is an accomplished servicer for commercial mortgage-backed securities (CMBS) transactions, government-sponsored enterprises (GSEs), and many other third-party clients. It is an adept service provider for other servicers and is experienced with single-family rental (SFR) loans and related securitizations as well.

The excellent technology suite for primary and master servicing includes robotic components, a business analytics tool, and robust borrower and client portals. The nearly all cloud-based platform includes a comprehensive data security program along with sound data backup and testing practices. Berkadia continues to enhance applications to further boost its workflow management, controls, and reporting capabilities.

The master servicer ranking acknowledges Berkadia’s expertise and successful record with CMBS reporting and advancing but also considers the Company’s modest portfolio activity involving CMBS loans with subservicers. However, subservicer tracking and auditing procedures are sound and commensurate with the level of required oversight. As a growing business, Berkadia also oversees many correspondent servicers for insurance company clients.

The special servicer ranking considers Berkadia’s operational scale and relatively modest portfolio volume over the past few years. Nonetheless, the Company has highly experienced personnel, sound controls, effective reporting capabilities, and a successful performance record. In addition to any CMBS loan transfers, the group handles default management for balance sheet loans and for Fannie Mae and Housing and Urban Development (HUD)-backed loans. A legacy asset management tool, in tandem with other applications, satisfactorily addresses the data management and reporting requirements.

As of June 30, 2023, Berkadia’s total servicing portfolio contained 20,876 loans with an aggregate unpaid principal balance (UPB) of $397.36 billion. Within this total, Berkadia was the primary or combined primary/master servicer for 850 CMBS loans, 2,371 Fannie Mae loans, and 3,332 Freddie Mac loans, of which most were in securitizations. The Company also serviced 822 securitized SFR loans. The CMBS master servicer-only portfolio contained 15 loans with a UPB of $109.2 million involving three subservicers, of which one serviced 13 loans and the others serviced one loan each.

As of June 30, 2023, Berkadia was the named special servicer on 15 securitizations consisting of 386 loans with a $5.14 billion UPB. The active portfolio contained 47 loan positions with a total $744.4 million UPB consisting primarily of healthcare and multifamily assets. Berkadia classified approximately 74% of the loans in its active special servicing portfolio as performing. Over the past few years, most activity has involved HUD, GSE, and non-CMBS transactions. However, Berkadia recently added a loan collateralized by a prominent office property to its active special servicing portfolio.

All rankings are subject to surveillance, which could result in rankings being raised, lowered, placed under review, confirmed, or discontinued by DBRS Morningstar.

DBRS Morningstar North American commercial mortgage servicer rankings are not credit ratings. Instead, they are designed to evaluate the quality of the parties that service commercial mortgage loans. Although the servicer’s financial condition contributes to the applicable ranking, its relative importance is such that a servicer’s ranking should never be considered as a proxy of its creditworthiness.

Notes:
All figures are in U.S. dollars unless otherwise noted.

The principal methodology is North American Commercial Mortgage Servicer Rankings (August 23, 2023; https://www.dbrsmorningstar.com/research/419592).

For more information on this industry, visit www.dbrsmorningstar.com or contact us at info@dbrsmorningstar.com.

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